A New Jersey appellate court recently refused to enforce an online forum selection clause that was contained in a browsewrap agreement, but it stopped short of holding that browsewraps are unenforceable as a matter of law. The case is interesting because of the comparisons the court draws with the influential and well-known case of the United States Court of Appeals for the Second Circuit Specht v. Netscape Communications Corp. and the New Jersey case Caspi v. Microsoft Network, L.L.C. (It’s also interesting because the case involves the online purchase of a “performance-enhancing” supplement known as “Erection MD,” but I digress.)
I stumbled across Hoffman v. Supplements Togo Management, LLC via this post by Venkat Balasubramani on Eric Goldman’s Technology & Marketing Law Blog. Venkat’s post discusses the court’s opinion and some of its implications for companies that sell products and services online.
The Online Transaction and Lawsuit
Plaintiff Hoffman purchased a bottle of 60 Erection MD pills from Supplements Togo’s e-commerce website and shortly thereafter filed suit alleging that he didn’t get what he paid for (although he didn’t actually take any of the pills). Supplements Togo filed a pre-answer motion to dismiss, arguing, among other things, that Hoffman couldn’t sue in New Jersey because Supplements Togo’s online terms contained a forum selection clause that required customers of the website to sue only in Nevada.
The trial court ruled in favor of Supplements Togo, holding that Hoffman agreed to the forum selection clause when he purchased the Erection MD products. The appeals court reversed, holding that the forum selection clause was presumptively unenforceable. The appeals court explained its reversal, “We do so because defendants’ website was evidently structured in an unfair manner so that the clause would not appear on a purchaser’s computer screen unless he or she scrolled down to display the ‘submerged’ clause before adding the product to his or her electronic ‘shopping cart’.”
Is Hoffman More Like Specht or Caspi?
In Caspi the appellate division of the New Jersey Superior Court stated, “If a forum selection clause is clear in its purport and has been presented to the party to be bound in a fair and forthright fashion, no consumer fraud policies or principles have been violated” (Caspi v. Microsoft Network, L.L.C., 323 N.J. Super. 118, 124 (App. Div. 1999). Here are details of the presentation of the forum selection clause the Caspi court found significant:
- The forum selection clause was contained in a clickthrough agreement with “I Agree” and “I Don’t Agree” action buttons.
- The website user could proceed only after he or she had an opportunity to review the membership agreement which contained the forum selection clause and assented to it.
- There was nothing extraordinary in the size or placement of the forum selection clause text.
Thus, the agreement at issue in Caspi was a leak-proof clickthrough agreement. The Caspi court concluded:
We discern nothing about the style or mode of presentation, or the placement of the provision, that can be taken as a basis for concluding that the forum selection clause was proffered unfairly, or with a design to conceal or de-emphasize its provisions. To conclude that plaintiffs are not bound by that clause would be equivalent to holding that they were bound by no other clause either, since all provisions were identically presented.
The Hoffman court contrasted the presentation of the forum selection clause at issue in Caspi with the presentation of the arbitration provision at issue in Specht. In Specht the clause was:
- not displayed on the same page as the “action” button that allowed website users to download Netscape’s software; and
- accessible via a hyperlink that was located well below the “action” button and not visible to a user who did not scroll down below the action button (in other words, “submerged”).
In contrast to Caspi and similar to Specht, the Supplements Togo forum selection clause was contained in a disclaimer that was in a submerged portion of the website. (Note to website owners: it’s bad news when a court refers to your online terms as being “submerged.”) In addition, it was not presented in a leak-proof manner because a consumer could select one of the products on the website and proceed to web pages that did not contain the disclaimer.
The appeals court concluded that Supplements Togo’s forum selection clause was presumptively unenforceable because of the way it was presented; however, the court expressly did not reach the question of whether browsewraps are invalid as a matter of law in New Jersey and noted that the caselaw across the country is divided on the issue.
Thanks for the link Brian. I would be curious to see numbers for browsewrap cases. My mildly informed sense is that they are routinely enforce, unless there are some wacky terms or facts (as in this case).
Venkat: I’d like to see the numbers on browsewrap enforcement too and suspect that clickwrap vs. browsewrap doesn’t generally make a difference. As long as courts are using traditional contract principles, the duty to read should be pretty hard to overcome, and I think it’s getting harder to argue that users of websites don’t have reasonable notice that they are bound by TOS.
On the wacky terms, the doctrine of reasonable expectations should give courts an out, although if ambiguity is required to apply the doctrine (as is the case in Missouri where I practice), it might not be available.